In his recent Q4 2022 Letter, David Einhorn explained how he benefited by shorting so called ‘innovation’ stocks. Here’s an excerpt from the letter:
We are nothing if not persistent. In March of 2021, we again believed that the bubble had popped… this time correctly. We created our third bubble basket with thirty-one names totaling 6.5% of capital. This bubble basket remains in the portfolio, though we have covered some names. All but one of these stocks are down through year-end from our entry, with an astounding twenty-four of them down more than 70%.
The cumulative positive impact on ourreturns has been 3.0% of capital.
In early 2021, we also identified an actively-managed ETF of so called “innovation” stocks that appeared to us to have significantly similar characteristics to our bubble names. We shorted a basket comprised of the components of that ETF in February 2021 that we ramped up to 9.0% of capital. It has declined by 76% from our first entry. The cumulative positive impact on our returns has been 6.4% of capital.
Finally, in January 2022, we turned from cautious to bearish. We identified our fifth bubble basket of thirty-one names, and instituted a 6.0% combined short position. This basket also remains in place. As of year-end, twelve of the stocks have fallen at least 50% and only one stock is positive with a 23% gain.
The cumulative positive impact on our returns from our 2022 bubble basket has been 2.4% of capital.
You can read the entire letter here:
Greenlight Capital Q4 2022 Letter
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